What is 7p ? In what cases is salary exempt from personal income tax, in Spain?

In Spain, the Personal Income Tax Law provides for cases where income is exempt from personal income tax. Article 7, section p) concerns displaced or expatriate workers who benefit from the exemption for an amount of up to 60100 euros per year. In other words, the worker’s salary will not be taxed on the first 60100 euros.

The objective of this exemption is twofold:

  1. Encourage the competitiveness and internationalization of Spanish companies
  2. Use the knowledge acquired by the worker abroad for the benefit of the Spanish company.

This exemption is an advantage for both the worker and the company since it allows the worker to receive a higher net remuneration without entailing any cost for the company that employs him.

Conditions required to apply the exemption

Not all workers who travel for professional reasons will be able to benefit from the exemption. In order to benefit from the 7p exemption, the following conditions must be met:

  1. Be a Spanish tax resident in the year of travel
  2. The destination country must have an agreement to avoid double taxation with Spain, or have a tax similar to income tax (it cannot be a tax haven).
  3. The work must actually be carried out abroad and must benefit a non-resident company.
  4. It cannot be applied if you have chosen to pay taxes under the franchise regime.

N.B. It does not apply to self-employed workers